Broker Note Briefing: Tuesday

By

Andrea Tryphonides

Feb 19, 2013 9:29 am GMT

The City’s number crunchers busied themselves with the retail and banking sectors today.

Analysts at UBS focused on European investment banks and raised concerns about the impact of legal proceedings. “Litigation has become an increasing headwind for the European banks, with additional charges and provisions announced on a more frequent basis,” the bank’s analysts said.

Associated Press

The brokerage sees litigation costs as a key factor in the debate about capital returns, with the European investment banks in particular shrinking as a result of a number of issues (leverage, capital, returns) and consequently, having a smaller earnings base to absorb these costs.

As a result, UBS AG was downgraded by Credit Suisse. On UBS, the brokerage has pushed out its capital return expectations as a result of the litigation analysis and sees the stock as fully valued at this stage.

Sticking with the banks sector, ING Groep was cut by Morgan Stanley. Its analysts said:

“With the Dutch economy back in recession, real estate deterioration and disappointing investment yields, we think ING faces a tougher backdrop for its earnings as well as for the timing and value of asset disposals.”

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